WTF? What language is this written in?
with thanks to the LMM
with thanks to the LMM
Showing posts with label I thought we weren't supposed to reason from price changes. Show all posts
Showing posts with label I thought we weren't supposed to reason from price changes. Show all posts
Wednesday, November 18, 2015
Wednesday, February 04, 2015
Sunk Costs in a Basketball Economy
Are Sunk Costs Irrelevant? Evidence from Playing Time in the National Basketball Association
Daniel Leeds, Michael Leeds & Akira Motomura
Economic Inquiry, forthcoming
Abstract: We use playing time in the National Basketball Association to investigate whether sunk costs affect decision making. Behavioral economics implies that teams favor players chosen in the lottery and first round of the draft because of the greater financial and psychic commitment to them. Neoclassical economics implies that only current performance matters. We build on previous work in two ways. First, we better capture potential playing time by accounting for time lost to injuries or suspension. Second, we use regression discontinuity to capture changes when a player's draft position crosses thresholds. We find that teams allocate no more time to highly drafted players.
Nod to Kevin Lewis
Thursday, October 09, 2014
Man bites Iceberg
This is an actual headline from an actual story from the actual internet:
Antarctic sea ice hits an all-time high, NASA blames global warming
No there is not a typo. That is what the story actually claims.
People, I'm not gonna read it, I'm just gonna mock it. Let me know in the comments if I'm being a jerk.
Saturday, June 01, 2013
Prices
House price dynamics with dispersed information
Giovanni Favara & Zheng (Michael) Song
Journal of Economic Theory, forthcoming
Abstract: We use a user-cost model to study how dispersed information affects the equilibrium house price. In the model, agents are disparately informed about local economic conditions, consume housing services, and speculate on price changes. Optimists, who expect high house price growth, buy in anticipation of capital gains; pessimists, who expect capital losses, prefer to rent. Because of short-selling constraints on housing, pessimistic expectations are not incorporated in the price of owned houses and the equilibrium price is higher and more volatile relative to the benchmark case of common information. We present evidence supporting the modelʼs predictions in a panel of US cities.
Thursday, September 27, 2012
Oh NGDP, is there anything you can't do?
In a long post over at Free Exchange, Ryan Avent passionately defends the honor of NGDPism against any and all heretics. This time it's GMU wonder boy Eli Dourado in the cross-hairs.
But Mr. Avent's analysis, to speak plainly, makes no sense at all. Let's break it down.
Mr. Avent starts with this chart, which he argues shows how NGDP growth is strongly related to job growth and thus crucial to economic performance:
But people here's the thing. NGDP is PY, the price level times real income. And one of those components, real income, is indeed highly correlated with jobs. The other component, prices, is not.
Let's look at how inflation (growth in the price level) and real GDP growth each chart up with jobs growth over Mr. Avent's sample period, starting with inflation:
The linear correlation between inflation and jobs growth shown here is 0.22, which is INSIGNIFICANTLY DIFFERENT FROM ZERO (t-stat = 1.01). In other words, one component of NGDP, prices, is not significantly correlated with job growth over this period (not even at the 0.20 level). Another way to see the lack of correlation is to note that if we ran a regression of jobs growth on inflation here the r-square would be around 0.05.
Now let's look at the other component, Real GDP growth:
The linear correlation between real GDP growth and jobs growth shown here is 0.64 which is SIGNIFICANTLY DIFFERENT FROM ZERO (t-stat = 8.2) at the 0.01 level. The r-square of this regression would be around 0.41.
In other words, Mr. Avent is using fluctuations in the real economy to explain fluctuations in the real economy. When real output tanks, jobs tank. It does appear from the graph that GDP growth might lead job growth, but we are really just graphing the same thing twice here.
People there's plenty more to come after the jump:
But Mr. Avent's analysis, to speak plainly, makes no sense at all. Let's break it down.
Mr. Avent starts with this chart, which he argues shows how NGDP growth is strongly related to job growth and thus crucial to economic performance:
But people here's the thing. NGDP is PY, the price level times real income. And one of those components, real income, is indeed highly correlated with jobs. The other component, prices, is not.
Let's look at how inflation (growth in the price level) and real GDP growth each chart up with jobs growth over Mr. Avent's sample period, starting with inflation:
The linear correlation between inflation and jobs growth shown here is 0.22, which is INSIGNIFICANTLY DIFFERENT FROM ZERO (t-stat = 1.01). In other words, one component of NGDP, prices, is not significantly correlated with job growth over this period (not even at the 0.20 level). Another way to see the lack of correlation is to note that if we ran a regression of jobs growth on inflation here the r-square would be around 0.05.
Now let's look at the other component, Real GDP growth:
The linear correlation between real GDP growth and jobs growth shown here is 0.64 which is SIGNIFICANTLY DIFFERENT FROM ZERO (t-stat = 8.2) at the 0.01 level. The r-square of this regression would be around 0.41.
In other words, Mr. Avent is using fluctuations in the real economy to explain fluctuations in the real economy. When real output tanks, jobs tank. It does appear from the graph that GDP growth might lead job growth, but we are really just graphing the same thing twice here.
People there's plenty more to come after the jump:
Subscribe to:
Posts (Atom)